With the start of the new financial year, a slew of regulatory changes will impact your investments across equity markets, mutual funds and other schemes. Here’s a guide on what changes for investors in FY24.
In a surprise move during the Parliament session, the union government has proposed to increase Securities Transaction Tax (STT) by 25% on sale of futures and options contracts. The new rules will kick-in from FY24. The STT on options is proposed to be increased to 0.0625% from 0.05% and on futures contracts to 0.0125% from 0.01%. STT is a tax investor has to pay on the total consideration paid or received after making a share transaction.
Debt mutual funds tax
The Finance Bill 2023 has proposed to classify income from debt mutual funds as a short-term capital gain. The new norms take effect from FY24. Under the new rules, investment in debt mutual funds that are bought on or after April 1, will be taxed as short-term capital gains at applicable tax rates. Existing LTCG benefits will continue for investments made on or before March 31, 2023. That is, capital gains from debt funds, international funds and gold exchange traded funds (ETFs), irrespective of their holding period, will be taxed at an individual’s relevant applicable tax rate. Debt mutual funds held for more than three years will no longer enjoy indexation benefits. Indexation takes into account the inflation during the holding period of a mutual fund unit and consequently increases the purchase price of the asset and this reduces the tax.
New income tax slabs
The Union Budget 2023 has proposed a number of changes to the income tax regime. The tax slabs falling under the new income tax regime have been reduced to five from six earlier. The new slabs will be applicable to those taxpayers who opt for the new tax regime in FY24. Further, under the new income tax regime, the tax rebate has been increased from Rs 5 lakh to Rs 7 lakh. Also, the basic exemption limit under the new tax regime has been revised from Rs 2.5 lakh to Rs 3 lakh.
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Small savings rate hike
The government has raised interest rates on most small saving schemes by up to 70 basis points for the first quarter of FY24. The rate hikes are in line with the interest rates in the economy. For the national savings certificate (NSC), interest rate is set at 7.7% from 7% earlier. The new rate for the girl child savings scheme Sukanya Samriddhi has been increased to 8% from 7.6%. Meanwhile, the interest rate on senior citizen savings schemes and Kisan Vikas Patra (KVP) is 8.2%, and 7.5% respectively.